Tactical asset allocation is an investment strategy that involves adjusting the mix of different asset classes, such as stocks, bonds, and cash, based on short-term market forecasts. Investors aim to capitalize on market inefficiencies and trends by shifting their investments to maximize returns while managing risk. This approach differs from strategic asset allocation, which maintains a long-term, fixed asset mix. Tactical asset allocation requires ongoing analysis and decision-making, allowing investors to respond to changing market conditions and economic indicators, ultimately seeking to enhance portfolio performance over time.